Spotify, the music streaming service, has signed up its one millionth paying
subscriber in Europe.

The milestone is an important announcement as the service is understood to be in the process of raising $100 million fresh investment, which not only gives the Swedish company a valuation of $1 billion, but should give it enough capital to finally launch in the US.

Daniel Ek, Spotify’s chief executive said: “Growing to over 1 million paying subscribers is an awesome milestone for us and we're humbled to see how popular Spotify has become over the past two years. More than ever, we're seeing the power of our ‘freemium’ model, with the vast majority of subscribers upgrading after having first used the free service and the ratio of paying subscribers to active free users now 15%. We're excited about what's in store for this year and will keep working away to make Spotify the best music service possible."

The one million subscribers represents 15 per cent of Spotify’s active users, which total up to 6.67 million across the UK, Spain, France, Germany, Sweden, Finland and Norway.

The company has been promising to launch in the US for the best part of two years, but has so far been prevented by the huge cash demands from the US music labels.

Ek added: “'It seems like only yesterday we were hatching ideas for a new music service in a tiny office-cum-apartment with a broken coffee machine, and the party we threw having reached one million users almost two years ago today was one to remember.

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So it’s with a sense of real pride and excitement that we can announce a new milestone today, having welcomed our millionth paying subscriber to the service. It’s a testament to our fantastic users who continue to support us and spread the Spotify word, either by telling friends or sharing some of the 200 million playlists that you’ve put together so far.”

The service, which offers two tiers of subscription, as well as a free service interspersed with adverts, depends upon growing its subscription revenues for profitability. The subscriptions allow people to turn the adverts off and access their music on the move.

In 2009, Spotify lost £16.6 million in the UK, with a turnover of £11.3 million.

The company faces a potentiallyhuge hurdle if Apple enforces its new subscription service fee onto the music service. According to Ben Drury, the chief executive of 7digital, an online music retailer, Spotify risks having its whole business model derailed by the new levy.

He said: “If Apple forces this change on to Spotify, it would become loss-making as it and other digital music subscription services, cannot afford to pay Apple 30 per cent of their revenues. The big question is whether Apple will actually force this through… As it stands, if Apple does force this upon services like Spotify, it makes it impossible for subscription music services to stay on the Apple platform.”